MONMOUTH INC.

Case
M&A Analysis

Submitted by Group-6
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 Monmouth Inc-About the Company

Company
Background
Leading producer of engines and compressors
Major consumers & clients: Oil & Gas industries
Operates in a cyclical market
based on nature of machine and equipment sales
Sought stable firm to be included in their portfolio
Diversify portfolio through acquisitions
Sales breakdown
Share price: $24
Industrial market: 25%, Consumer market: 75%
Looking to expand in the industrial market
Acquisition parameters
Industry should be one in which Monmouth could become a major player
Management wanted to have leadership in a few distinct areas
Fairly stable industry with a broad market for products and a product line of- small ticket items
To eliminate companies having undue profit dependencies
Acquire only leading companies in their respective market segments

3
 Monmouth Inc-Previous Acquisition

DESSEX RULE
KROLL ELECTRIC
Worlds largest manufacturer of
Worlds leading supplier of soldering tools in
measuring rules and tapes
Industrial, Electronic & Consumer markets
Acquisition rationale
Acquisition rationale
Quality product line
High quality product line and production
Good distribution network (15,000
capacity in England, Germany & Mexico
retail hardware stores in US

KEANE CORPORATION

Highly profitable; suffering due to

mismanagement
Acquisition rationale
High quality measuring and fastening line

4
 Robertson Tool Company-Overview

Poor sales and profit performance

Dwindling
Projected 2% growth against industry growth rate of 6% Performance

Low percentage of outstanding stock held by family & management

Largest domestic manufacturer of cutting and edge hand tools

Good
Acquisition
Leader in its two product areas
Target
because
Distribution network involving 2100 wholesalers, extending to 15,000 retail outlets

5
 Takeover Attempt by Simmons

2000: Simmons, a wide ranging conglomerate with interests in electrical

equipment's,
equipment's, tools,
tools, nonferrous
nonferrous metals
metals and
and rubber
rubber products
products purchased
purchased
44,000
44,000 Robertson
Robertson shares
shares

March,
March, 2003:
2003: Simmons
Simmons informed
informed Robertson
Robertson management
management of of its
its plan
plan to
to
tender
tender immediately
immediately for
for 437,000
437,000 ofof Robertsons
Robertsons 584,000
584,000 outstanding
outstanding
shares
shares at
at $42
$42 per
per share
share in
in cash.
cash. The
The $42
$42 per
per share
share represented
represented a a $12
$12
premium.
premium. This
This eventually
eventually became
became the
the first
first opportunity
opportunity for
for Monmouth.
Monmouth.

April,
April, 2003:
2003: An
An agreement
agreement was
was reached
reached with
with NDP
NDP Corporation,
Corporation, aa firm
firm
with
with major
major interest
interest in
in publishing
publishing and
and replacement
replacement and
and original
original automotive
automotive
equipment,
equipment, to
to do
do a
a merger.
merger. The
The offer
offer was
was a
a 5:1
5:1 common
common stock
stock swap.
swap.

As
As Simmons
Simmons was
was concerned
concerned about
about the
the devaluation
devaluation after
after NDP-Robertson
NDP-Robertson
merger
merger announcement,
announcement, Simmons
Simmons wanted
wanted it
it to
to come
come together
together with
with
Monmouth
Monmouth and
and this
this translated
translated as
as the
the second
second opportunity
opportunity for
for Monmouth.
Monmouth.

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 Potential Benefits From Acquisition-ManMouth
Reduction of COGS
Effort to sell every market segment
results in manufacturing inefficiency
& ballooning inventories
Estimate to reduce COGS from 69%
to 65% of sales
Reduction in SG&A expenses
To be managed by unifying sales
force of hand tool lines and
advertising
Drop down from 22% to 19% of
sales
CONCLUSION
Opportunity for
Simmons As per the calculations the
In Robertson-Monmouth acquirer should extend the
merger, Simmons could
convert its shares into
offer to Robertson as the
common stock of company is Undervalued
Monmouth
Redistribution of market segments to achieve
better earnings
75% Industrial and 25% Consumer pattern would
change to 50% Consumer, 50% Industrial
Sales increases could be expected from Robertsons
pulling more Monmouth product in the industrial
markets
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